Ann: Annual Report to shareholders , page-2

Dear Chairman,

I have read your report to shareholders and I am astounded to see that you make no comments with respect to last year’s “report to shareholders”.

May I quote you from last year’s report? “While the Company is disappointed with the lack of sales generated from our Walkamin factory, management and the board of directors are very encouraged by the status of the factory production, given the level of financial and human resources currently available. Large volumes of veneer are now being produced and the Company is dedicated to establishing a market for the veneer”. In the last year you have virtually shut down this facility. Yes, I know you have said through the year that this was to reduce costs in order to extend available funds or words to that effect. But why would you shut down the facility if you were truly producing large volumes of veneer? What happened to those “large volumes of veneer”? Is there a market? If so, what is the size of the market share that banana veneer could take and at what price? How much veneer and fibre did you actually produce since your last report to shareholders? How much revenue was generated from the sale of veneer and fibre?

I am not going to comment on the financials as it appears that you will struggle to stay afloat this coming year despite some of you foregoing fees and salaries, belatedly, in the hope this will help. You should have done that three or four years ago and saved the company at least $1,000,000 of shareholder and tax payers’ money. I also acknowledge that the Egyptians have started to fund the cost of the next machine (in tranches) but this is sunk money and there is probably little profit in it for stakeholders.

You also comment that “In the 2009-2010 chairman's report I (that's you Mr Chairman) noted that the Company was committed to the commercialisation strategy which involves licensing its technology to enable the establishment of the first full scale production factory in Egypt to supply the European panel and veneer product markets. The Company’s plans were significantly interrupted by the democratic revolution in Egypt in January 2011”.

What? Are you telling us that PPY is a player on the world stage and that your first foray outside Australia is in one of the most unstable political regions in the world and you didn’t know that this was a risk? There has been a war raging in the region since the Iran/Iraq wars began in 1991 with uprisings and civil unrest in virtually all countries in this region and it’s not going away anytime soon. As part of corporate governance surely you would have made allowance and contingencies for this? Now the USA is pulling out of Iraq. In your opinion how stable do you think Egypt is going to be over the next couple of years?

“We are confident that our choice of Egypt remains the right one because of the hunger in Egypt for a new indigenous fibre source and the fact that it is a strong banana growing country”.

Egypt produces 1% of the world’s banana production. That’s about 650,000 tonnes of bananas and that would produce (based on information available on the web) 65,000 tonnes of fibre if you could get it all, not allowing for any yield losses. I do note that you are targeting 5,000 tonnes of banana fibre per year so there are plenty of raw materials to exploit on that basis.

On the other hand India produces about 11,000,000 tonnes of bananas and potentially 1,100,000 tonnes of banana fibre again not allowing for any yield losses. The region is infinitely more stable than the Middle East and has even cheaper labour and significant government incentives for development. Why have you not targeted India as a region to set up a facility?

Your understanding, “that Egypt has not a single wood forest and not a single wood fibre production factory and the only source of natural fibre in Egypt is a relatively small quantity of bagasse fibre” is completely wrong. In fact, the Egyptian government is subsidising the forestation of Egypt and there are significant stands of Eucalypt, Casuarina, Acacia and even poplar being grown there. So much so, that it has a thriving pulp and paper industry where they are even exporting 30% of its production to neighbours. No doubt this would be a blend of recycled fibre as well.

Here is the trend in Egyptian Total (Net) Forest Cover, 1990-2010 (UN FAO report)

Total forest cover (1000 ha):
1990 2000 2005 2010
44 59 67 70

Eucalyptus, pine, and poplar were considered for pulp and particleboard, harvesting in years 4 and 6, pine and casuarinas were considered for construction wood harvesting in year 8, and khaya and dalbergia were for sawn timber and veneer, harvesting in year 15 years (Economic feasibility of alternative crops with potential for re-use of treated water in Egypt; IRG 2009). Of course, there is no disputing that other fibre sources need to be exploited and hopefully the PPY technology could help.

It is also a fact that Egypt has a particleboard industry based on wood fibre and your company visits to Egypt should have been able to find these factories.

As for the “yellow” pallet project you cannot get into a lower value added transport product than pallets of any description. This is an area of absolute low price competition and I would ask that you outline how the PPY technology can be of benefit to stakeholders (profit-wise) in this market.

I wish you much luck in the next twelve months as your strategy seems to continue to chop and change at a whim.

Yours sincerely

Keeting